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Rising Costs Jeopardize Drug Plans for Seniors

Health: New estimates cast doubts on efforts by Bush as well as Democrats to offer coverage for older Americans. Soaring prices, growing prescription use are blamed.


WASHINGTON — New projections released today of dramatically higher prescription drug costs are casting greater uncertainty on President Bush's budget proposals for revamping Medicare and making it more difficult for lawmakers on Capitol Hill to devise a drug coverage plan for seniors.

One authoritative estimate prepared by the nonpartisan Congressional Budget Office had already predicted that the nation's seniors will spend nearly $1.5 trillion on prescription drugs over the next 10 years, rising from an annual total of $80.9 billion in 2002 to $227.7 billion in 2011. That's about 30% higher than similar 10-year CBO predictions made last spring.

Today, those figures gained further weight with a report published by the federal Health Care Financing Administration saying that for the general population, prescription drug expenses--which accounted for 9.4% of all personal health spending in 1999--will continue to rise at a faster rate than any other category of health care services, reaching 16% of personal health spending in 2010.

The HCFA predicts that drug costs will grow at an average rate of 12.6% a year through 2010. That is roughly the same as the budget office's projections of the annual rate of increase in prescription drug spending by seniors. For those over age 65, the average yearly bill will rise from $1,989 per person next year to $4,818 per person in 2011, it estimates.

The sharp upward revision in senior drug spending means that any congressional plan to subsidize prescription drugs for seniors will cost considerably more than previously anticipated if it offers the same level of coverage.

Medicare, the federal health insurance program that covers 39 million seniors and disabled Americans, provides no reimbursement for outpatient prescription drugs under its traditional coverage plan.

The new figures also signal growing problems for Medicaid, the federal-state health care program for the poor that does cover prescription drugs. About half of the states have already used up the money they budgeted for Medicaid this year, largely because of higher-than-anticipated prescription drug expenses, according to the National Governors' Assn.

"It's a two-edged sword," said Ron Pollack, president of Families USA, a consumer group. "On the one hand, it makes clear that there's a greater urgency to help seniors. On the other hand, it shows that when you help them it's going to cost a large amount of money."

Both sets of numbers reflect two fundamental trends: The price of prescription drugs is rising rapidly and people are using more drugs, said Katherine Levit, director of the HCFA's National Health Statistics Group. Historically, older Americans have filled more prescriptions than those under age 65, and that trend is expected to continue as more new medications become available and as physicians increasingly turn to pharmaceuticals before recommending surgery or other hospital-based treatments.

The budget office figures, which were presented to congressional staff members about two weeks ago in closed-door briefings on Capitol Hill, are already influencing Senate budget deliberations over how to balance competing demands for money, including drug coverage, tax cuts, defense and education.

Bush did not use the new data when he calculated the cost of his 10-year plan for providing prescription drug coverage for seniors, although he did incorporate similar estimates in a shorter-term plan to help low-income seniors buy prescription drugs, according to officials at the Office of Management and Budget. And Bush probably won't adjust his numbers when he submits a more detailed budget blueprint to Congress in April, administration officials said.

On Capitol Hill, the new numbers are causing problems for both parties. Democrats say they show that Bush's Medicare plan is woefully insufficient. But they also wreak havoc with Democratic alternatives, which are more generous to seniors than Republican proposals and which may begin to appear so expensive that many lawmakers will consider them unaffordable.

At a recent Senate committee hearing, lawmakers said the CBO figures suggest that Bush has not allocated enough money to provide a drug benefit for seniors.

"The president's prescription drug cost estimate is not within hailing distance of what it's going to take to cover people," said Sen. Kent Conrad of North Dakota, the ranking Democrat on the Senate Budget Committee.

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) said the White House was not able to use the new numbers when it prepared the budget that was released last month. He called Bush's proposal to spend $156 billion over 10 years on modernizing Medicare and creating a prescription drug benefit "a starting point."

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